One of the ways in which the Civil Justice Reform of April 2009 (“CJR”) transformed the way in which litigation is conducted in Hong Kong, was the requirement that pleadings be verified by a statement of truth. The statement serves as confirmation that the party pleading their case holds an honest belief that the facts stated therein are true and discourages pleadings that are unsupported by evidence or speculative in nature.

The punishment for falsifying a statement of truth was illustrated in the recent case of Mathnasium Center Licensing LLC v Chang Chi Hung [2019] HKCFI 664.

Background

The Plaintiff sued under a Regional Franchise Agreement (“RFA”) for payment of outstanding royalties. Under the RFA, the exact amount of royalty payments depended on the number of learning centres operated by the Defendant. In that regard, the Defendant admitted, under the statements of truth by its director, that the Defendant operated a certain number of centres in Hong Kong. Upon reliance on this information, the Plaintiff acted to its detriment because it transpired that the admission made by the director of the Defendant (when he signed the statement of truth) was in fact not true.

Issues

In determining whether the director of the Defendant was guilty of contempt, the burden was on the Plaintiff to prove beyond reasonable doubt (1) the falsity of the impugned statement, (2) to show that the statement has or would have interfered with the course of justice in some material respect and (3) that the maker of the statement, at the time it was being made, had no honest belief in the truth of the statement and knew of its likelihood to interfere with the course of justice.

Decision

The director of the Defendant gave evidence at trial. In its judgment, the court had no doubt as to the falsity of the statement of truth and clarified that actual interference in the course of justice is not required, provided that the making of the false statement was likely to cause such interference. In the present case, the court was satisfied that the Plaintiff had relied on the false admission. The trial judge was convinced that the director did not have an honest belief in the truth of his admission when signing the statement of truth. 

Consequently, it was held that the Defendant was guilty of contempt of court. Sentencing has been adjourned to allow the director a chance to advance his mitigation and the Plaintiff was awarded costs of and incidental to the contempt proceedings to be taxed on an indemnity basis.

This judgement underscores the very serious consequences for falsifying a statement of truth and serves as a reminder for all practitioners and litigants alike to read and understand the documents to be verified carefully before a statement of truth is signed.  

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